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I have been poking around with investing for a few years now. I have diversified my assets a decent amount, between a home, several IRA's and 401k's, savings and checking accounts, and a little bit of commodities (gold, silver and recently looked into Moldavite as another option). All of the ways I've diversified so far are ok, however they don't really give me much control, and only mediocre to moderate returns.

I have been researching stocks, options, indexes and ETF's, etc. for some time, and would like to start buying and selling on the market. I have looked into some online "brokers" like eTrade, Scottrade, etc., and I have looked at various stocks and a couple indexes. I generally understand how stocks, indexes, and mutual funds work. I am not entirely certain how options work (I'll ask another question for that). I will admit, I am a bit surprised and overwhelmed by the wide variety of ways that one can invest these days, and I could use some advice. So, here are my key questions:

  • Where does one start?
    • Stocks, indexes/ETF's, mutual funds, options?
    • Most of my retirement investments are mutual funds, and I would kind of like to have more control over these new investments than a MF would give me.
  • What online tools will best serve a new invester?
    • I have looked into eTrade, Scottrade, Ameritrade, etc.
    • I liked what eTrade and Scottrade had to offer, scottrade is cheaper, but seems less complete.
    • I am a beginner, however I learn quickly, and I like having control over my funds.
    • Are there better/cheaper ways to invest in stocks besides online sites like etrade?
  • How would I go about picking good stocks, indexes, or options to invest in first?
    • I have been watching some tickers for big companies that I know about, however they don't seem to be the most ideal stocks to get good return from (although they might be good for long-term stability in my investments later on.)
    • Where can I go to get GOOD info on investing options, with solid information about performance and returns?
    • What exactly are penny stocks, and are they a good type of stock for a newcomer to invest in?

I am interested in both long-term investing, as well as short-term money making via dividends (or whatever else can provide short-term returns.) I am interested and open to other investing options as well. There is so much uncertainty in so many markets these days, I want to make sure I have my eggs in enough baskets that if something else collapses, I want to have some backups.

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I take the route of the tortoise. I subscribe to the adage that you invest in an excellent index fund like VFINX and forget about day trading and trying to make short term gains.

Just like I would do at a casino I do gamble a bit for fun. Using etrade you can purchase some Vanguard or a billion of other things. I purchased some Apple, Google, Verizon, and Ford (when it was at 1.3) and all of those have been good investments. However, I don't invest the majority of my money in to individual stocks. I just do this with some 'play' money. After maxing out 401k, etc. I put away my 6 months of safety net in a money mark and put the rest in Vanguard.

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  • Thanks for the comment Ryan. While I like to tortoise most of the time, I am looking to get a bit more active and involved, and make some more shorter- and mid-term gains. I guess I can do that with eTrade, from what I've learned. – jrista Dec 24 '10 at 6:20
  • Investing and gambling shouldn't be mixed. There's no place for 'play money' when it comes to investing. Cherry picking individual stocks when index funds are available is almost invariably a bad call. The first paragraph of your answer is as good as bad is the second, which I chose to ignore. Thus, +1. – Calculus Knight Apr 24 '15 at 21:11
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Ryan's suggestion to index for your main strategy is dead on. Your risk is highest with one given stock, and decreases as you diversify. Yet, picking the stocks one at a time is an effort, when done right, it's time consuming. For what one can say about Jim "mad money" Cramer, his advice to spend an hour a month studying each stock you own, is pretty decent advice. Penny stocks are sub one dollar priced, typically small companies which in theory can grow to be large companies, but the available information tends to be tougher to get hold of.

Options are a discussion for a different thread, I discussed the covered call strategy elsewhere and show that options are not necessarily high risk, it depends how they are used.

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Where does one start?

For starting and stability MFs are very good option. Later after understanding, you will find that in your MFs, there are only few stocks are making major returns and others are only reducing your wealth. So now you can select these top stocks by studying various MFs' holdings and can start directly investing in them. But while starting with stocks, I would suggest to start with Market Leaders and Sector Leaders, you should never go for small and mid cap stock for higher returns initially.

How would I go about picking good stocks, indexes, or options to invest in first?

For starting picking good stocks, its good to stick with Leaders initially, because they rarely have corporate issues and have strong management. Before stocks you can also try hands on picking index funds. I would suggest go for options only after having high level of expertise else you will easily burn your hands. Also I suggest whenever you start with options start with very small capital for which you will not regret if it becomes zero. Tortoise style is best for getting grip on Derivative Markets. You need to put every step very carefully and needs to control your emotions (Greed, Fear and FOMO (Fear Of Missing Out)). Properly diversify your all funds, invest as per risk bearing capacity in various instruments. Keep an Emergency Fund (Bank Deposits, Bonds), Long Term (Stocks/MFs), Playful(Option/Future), etc..

Where can I go to get GOOD info on investing options, with solid information about performance and returns?

You can use all digital information available on internet or you can purchase any course but you will only learn by doing it. So start with few virtual trades and then later few small trades, and once you are getting good success rate and slowly slowly you can start taking more risks. I learned options by referring various videos available on YouTube.

What exactly are penny stocks, and are they a good type of stock for a newcomer to invest in?

They are never good for anyone even the most experience person. They are just a bet that this following company will do good in future and will become multi-beggar but if you check history its probability is very low. Penny Stocks are stocks having very small market capitalization, they are generally non-liquid (means very few quantity available for trading and you will not get proper entry-exit), they trade at very cheap price. You should definitely avoid them. Though you can find more details over my answer on this question. That answer will also help you in picking good stock as well.

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